The Japanese automotive industry is one of the most prominent and largest industries in the world. Japan has been in the top three of the countries with most cars manufactured since the 1960s, surpassing Germany. The automotive industry in Japan rapidly increased from the 1970s to the 1990s (when it was oriented both for domestic use and worldwide export) and in the 1980s and 1990s, overtook the U.S. as the production leader with up to 13 million cars per year manufactured and significant exports. After massive ramp-up by China in the 2000s and fluctuating U.S. output, Japan is now currently the third largest automotive producer in the world with an annual production of 9.9 million automobiles in 2012.[1] Japanese investments helped grow the auto industry in many countries throughout the last few decades.[citation needed]

Japanese zaibatsu (business conglomerates) began building their first automobiles in the middle to late 1910s. The companies went about this by either designing their own trucks (the market for passenger vehicles in Japan at the time was small), or partnering with a European brand to produce and sell their cars in Japan under license. Such examples of this are Isuzu partnering with Wolseley Motors (UK), and the Mitsubishi Model A, which was based upon the Fiat Tipo 3. The demand for domestic trucks was greatly increased by the Japanese military buildup before World War II, causing many Japanese manufacturers to break out of their shells and design their own vehicles. In the 1970s Japan was the pioneer in robotics manufacturing of vehicles.

In 1904, Torao Yamaha produced the first domestically manufactured bus, which was powered by a steam engine. In 1907, Komanosuke Uchiyama produced the Takuri, the first entirely Japanese-made gasoline engine car. The Kunisue Automobile Works built the Kunisue in 1910, and the following year manufactured the Tokyo in cooperation with Tokyo Motor Vehicles Ltd. In 1911, Kwaishinsha Motorcar Works was established and later began manufacturing a car called the DAT. In 1920, Jitsuyo Jidosha Seizo Co., founded by William R. Gorham, began building the Gorham and later the Lila. The company merged with Kwaishinsha in 1926 to form the DAT Automobile Manufacturing Co. (later to evolve into Nissan Motors). From 1924 to 1927, Hakuyosha Ironworks Ltd. built the Otomo. Toyota, a textile manufacturer, began building cars in 1936.[2] Most early vehicles, however, were trucks produced under military subsidy.

The Ford Motor Company of Japan was established in 1925 and a production plant was set up in Yokohama. General Motors established operations in Osaka in 1927. Chrysler also came to Japan and set up Kyoritsu Motors. Between 1925 and 1936, the United StatesBig Three automakers' Japanese subsidiaries produced a total of 208,967 vehicles, compared to the domestic producers total of 12,127 vehicles. In 1936, the Japanese government passed the Automobile Manufacturing Industry Law, which was intended to promote the domestic auto industry and reduce foreign competition;[5] ironically, this stopped the groundbreaking of an integrated Ford plant in Yokohama, modeled on Dagenham in England and intended to serve the Asian market, that would have established Japan as a major exporter[citation needed]. Instead by 1939, the foreign manufacturers had been forced out of Japan. Vehicle production was shifted in the late 1930s to truck production due to the Second Sino-Japanese War.[6][7][8]

For the first decade after World War II, auto production was limited, and until 1966 most production consisted of trucks (including three-wheeled vehicles). Thereafter passenger cars dominated the market. Japanese car designs also continued to imitate or be derived from European and American designs.[9] Exports were very limited in the 1950s, adding up to only 3.1% of the total passenger car production of the decade.[10]

During the 1960s, Japanese automakers launched a bevy of new kei cars in their domestic market; scooters and motorcycles remained dominant, with sales of 1.47 million in 1960 versus a mere 36,000 kei cars.[11] These tiny automobiles usually featured very small engines (under 360cc, but were sometimes fitted with engines of up to 600cc for export) to keep taxes much lower than larger cars. The average person in Japan was now able to afford an automobile, which boosted sales dramatically and jumpstarted the auto industry toward becoming what it is today. The first of this new era, actually launched in 1958, was the Subaru 360. It was known as the "Lady Beetle", comparing its significance to the Volkswagen Beetle in Germany. Other significant models were the Suzuki Fronte, Mitsubishi Minica, Mazda Carol, and the Honda N360.

The keis were very minimalist motoring, however, much too small for most family car usage. The most popular economy car segment in the sixties was the 700-800 cc class, embodied by the Toyota Publica, Mitsubishi Colt 800, and the original Mazda Familia. By the end of the sixties, however, these (often two-stroke) cars were being replaced by full one-litre cars with four-stroke engines, a move which was spearheaded by Nissan's 1966 Sunny.[12] All other manufacturers quickly followed suit, except for Toyota who equipped their Corolla with a 1.1 litre engine - the extra 100 cc were heavily touted in period advertising. These small family cars took a bigger and bigger share of an already expanding market. All vehicles sold in Japan were taxed yearly based on exterior dimensions and engine displacement. This was established by legislation passed in 1950 that established tax brackets on two classifications; dimension regulations and engine displacement. The taxes were a primary consideration as to which vehicles were selected by Japanese consumers, and guided manufacturers as to what type of vehicles the market would buy.

Exports of passenger cars increased nearly twohundred-fold in the sixties compared to the previous decade, and were now up to 17.0 percent of the total production.[10] This though, was still only the beginning. Rapidly increasing domestic demand and the expansion of Japanese car companies into foreign markets in the 1970s further accelerated growth. Effects of the 1973 Arab Oil Embargo accelerated vehicle exports along with the exchange rate of the Japanese yen to the U.S. Dollar, UK Pound, and West German Deutsche Mark. Passenger car exports rose from 100,000 in 1965 to 1,827,000 in 1975. Automobile production in Japan continued to increase rapidly after the 1970s, as Mitsubishi (as Dodge vehicles) and Honda began selling their vehicles in the US. Even more brands came to America and abroad during the 1970s, and by the 1980s, the Japanese manufacturers were gaining a major foothold in the US and world markets.

Japanese cars became popular with British buyers in the early 1970s, with Nissan'sDatsun badged cars (the Nissan brand was not used on British registered models until 1983) proving especially popular and earning a reputation in Britain for their reliability and low running costs, although rust was a major problem. In the 1960s Japanese manufacturers began to compete head-on in the domestic market, model for model. This was exemplified by the "CB-war" between the Toyota Corona and Nissan's Bluebird. While this initially led to benefits for consumers, before long R&D expenditures swelled. Towards the late 1980s and early 1990s Japanese automobile manufacturers had entered a stage of "Hyper-design" and "Hyper-equipment"; an arms race leading to less competitive products albeit produced in a highly efficient manner.[13]

On the evening of June 19, 1982, while celebrating his bachelor party at the Fancy Pants strip club, Vincent Chin, a 27-year old Chinese American from Detroit, Michigan, was approached by two Chrysler employees, Ronald Ebens and his stepson Michael Nitz, both of whom mistook him for a Japanese person and blamed the global popularity of Japanese automobiles for the loss of jobs in the American automotive industry (particularly blaming Chrysler's increased sales of Mitsubishi models as captive imports). One of the club's dancers heard Ebens proclaim, "It's because of you little motherfuckers that we're out of work." The fight between Ebens, Nitz and Chin continued into Detroit's outskirts after they were kicked out of the club. It took Ebens and Nitz 20 to 30 minutes to find Chin before they finally spotted him at a nearby McDonald'srestaurant. Ebens hit Chin with a baseball bat four times, cracking his skull. Chin was rushed to Henry Ford Hospital, where he died in a coma on June 23. His 500 wedding guests attended his funeral instead. Ebens and Nitz both received a three-year probation for their deadly crime, but neither served jail time.[14]

With Japanese manufacturers producing very affordable, reliable, and popular cars throughout the 1990s, Japan became the largest car producing nation in the world in 2000. However, its market share has decreased slightly in recent years, particularly due to old and new competition from South Korea, China and India. Nevertheless, Japan's car industry continues to flourish, its market share has risen again, and in the first quarter of 2008 Toyota surpassed American General Motors to become the world's largest car manufacturer.[15] Today, Japan is the third largest automobile market and, until China recently overtook them, was the largest car producer in the world. Still, automobile export remains one of the country's most profitable exports and is a cornerstone of recovery plan for the latest economic crisis.

^Benjamin, Daniel K. (September 1999). "Voluntary Export Restraints on Automobiles". PERC Reports: Volume 17, No. 3. Property & Environment Research Center. Retrieved 2008-11-18. In May 1981, with the American auto industry mired in recession, Japanese car makers agreed to limit exports of passenger cars to the United States. This "voluntary export restraint" (VER) program, initially supported by the Reagan administration, allowed only 1.68 million Japanese cars into the U.S. each year. The cap was raised to 1.85 million cars in 1984, and to 2.30 million in 1985, before the program was terminated in 1994